Headed Towards March Lows

Will We Find Support?

By Bryan Bottarelli
Friday, June 20, 2008 10:25 AM EDT
Fri, 20 Jun 2008 14:25:00 GMT

PLAY: Buy more COP July 100 Calls (COP GT) at or under $1.10, good for the day. Lower your protective stop limit to $0.45.

Dear Bottarelli Research Member,

In less than an hour of trading, the Dow has shed over 180 points — and the Blue Chip average is quickly approaching the March lows under the 11,800 level. At the same time, the Volatility Index (VIX) is once again spiking, which means that we’re stuck in a market where irrational trading decisions are being executed leading into the weekend.

Throw into the equation the fact that June options are expiring today, and we have all the makings for potentially wild price swings. Therefore, let’s stick to our tactical strategy of reducing exposure during times like this — and make the conscious choice to remain safely on the sidelines.

INDU

As you know, we’re currently holding two upside call positions. First, the COP July 100 Calls (COP GT), which we entered Monday $1.98. And second, the STLD July 40 Calls (RQL GH), which we also entered on Monday for $2.60. After hitting a new high today at $40.76, shares of STLD have fallen back down, but I think we’ll be ok with this position moving into next week. Therefore, continue to hold. But in terms of COP, I think we have a really nice opportunity to add to our position at current levels. After all, just look at the chart below:

COP

As you can see, shares of COP have been stuck within a tight trading range — all coming at a time where the major market averages were getting slammed. If we could see any sign of market stability, I think COP will quickly blast to a new high — with a possible upside move to $100.00 in the cards prior to July expiration. Therefore, I’d like to use the mini-price deterioration that we’ve seen over the last few days as an opportunity to add to our July call position. This will lower our cost basis, and keep us positioned to profit off any forthcoming upside move. Not only that, but there really isn’t a “safer” play than getting positioned alongside oil in a market like this — so let’s add to our COP calls now!

PLAY: Buy more COP July 100 Calls (COP GT) at or under $1.10, good for the day. Lower your protective stop limit to $0.45.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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